Did you know that most home improvement projects do not boost the property’s value plus generate an income? Accessory dwelling units which can be traced back to the early twentieth century are an exception to this. They not only boost the value of your home but can bring in extra income every single month.

This brings us to our next question how much does an ADU cost? We have the breakdown for you below.

How Much Does an ADU Cost?

The truth is that the cost for an ADU will vary based on a few factors. An ADU can be done in a basement, over a garage, or a separate attachment to your main home. Depending on your location preference and size will affect the cost.

The average price you can expect to pay for an attached ADU is around $75 per square foot. Another cost that you want to take into consideration is the permit and licenses in your area to approve your ADU. Getting a pre-approved ADU plan can sometimes be a bit tricky, this is why you want to become well informed right here when it comes to pre-approval https://actonadu.com/blog/the-ultimate-guide-to-pre-approved-adu-plans-in-san-jose.

Financing an ADU

There are options if you can’t afford to pay out hundreds or thousands of dollars outright for an ADU addition. One popular option you have is taking out an FHA 203(k) renovation loan. This loan is specifically for homebuyers that are looking to put the cost of a major home renovation into a purchase loan.

This is a good option for first-time homebuyers that do not have the best credit score out there. Keep in mind that the mortgage insurance cost is a little higher, usually around 1.75% of the loan value.

Another option is a short term construction loan. This loan is meant for financing costs that come with new home construction including ADU construction.

Short-term loans tend to have one-year terms with variable interest rates that are higher than long term mortgage loans. If you go with a short term construction loan you will have to convert the loan to a permanent mortgage which means you have to go through a second closing.

Another option is to take out a home equity line of credit. This is a popular option most homeowners choose because you can usually take out up to 90%. A pro with this option is that you will have much lower interest rates because it is a low-risk loan for lenders.

Feeling Like an ADU Pro?

Now that you know more about how much does an ADU cost you can make an informed decision whether you want to move forward with this project or not. If you do, make sure that you figure out your budget and find a builder that will work within your finances and deliver exactly what you are looking for.

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